38 U.S.C. § 3714 — Assumptions; release from liability

Page 912 TITLE 38—VETERANS’ BENEFITS § 3714 spect to the loan if the veteran had made appli- cation therefor incident to such disposal. Fail- ure of a transferee to assume by contract all of the liabilities of the original veteran-borrower shall bar such release of liability only in cases in which no acceptable transferee, either imme- diate or remote, is legally liable to the Sec- retary for the indebtedness of the original vet- eran-borrower arising from termination of the loan. The failure of a veteran to qualify for re- lease from liability under this subsection does not preclude relief from being granted under sec- tion 5302(b) of this title, if the veteran is eligible for relief under that section. (c) This section shall apply only to loans for which commitments are made before March 1, 1988. (Pub. L. 85–857, Sept. 2, 1958, 72 Stat. 1212, § 1817; Pub. L. 92–328, title II, § 204, June 30, 1972, 86 Stat. 397; Pub. L. 94–324, § 7(18), (19), June 30, 1976, 90 Stat. 722; Pub. L. 97–72, title III, § 303(f), Nov. 3, 1981, 95 Stat. 1060; Pub. L. 100–198, § 10(a)(2), Dec. 21, 1987, 101 Stat. 1323; renumbered § 1813 and amended Pub. L. 100–322, title IV, § 415(b)(2), May 20, 1988, 102 Stat. 550; Pub. L. 101–237, title III, § 313(b)(1), Dec. 18, 1989, 103 Stat. 2077; Pub. L. 102–40, title IV, § 402(d)(1), May 7, 1991, 105 Stat. 239; renumbered § 3713 and amend- ed Pub. L. 102–83, § 5(a), (c)(1), Aug. 6, 1991, 105 Stat. 406; Pub. L. 103–446, title XII, § 1201(e)(15), Nov. 2, 1994, 108 Stat. 4686.) Editorial Notes AMENDMENTS 1994—Subsec. (b). Pub. L. 103–446 before period at end substituted ‘‘section 5302(b) of this title, if the veteran is eligible for relief under that section’’ for ‘‘subsection 5302(b) of this title, if eligible thereunder’’. 1991—Pub. L. 102–83, § 5(a), renumbered section 1813 of this title as this section. Subsec. (a). Pub. L. 102–83, § 5(c)(1), substituted ‘‘3710’’ for ‘‘1810’’. Subsec. (b). Pub. L. 102–40 substituted ‘‘5302(b)’’ for ‘‘3102(b)’’. 1989—Subsecs. (a), (b). Pub. L. 101–237 substituted ‘‘Secretary’’ for ‘‘Administrator’’ wherever appearing. 1988—Pub. L. 100–322, § 415(b)(2)(B), renumbered sec- tion 1817 of this title as this section. Subsec. (a). Pub. L. 100–322, § 415(b)(2)(A), substituted ‘‘for purposes specified in section 1810’’ for ‘‘under sec- tion 1810’’. 1987—Subsec. (c). Pub. L. 100–198 added subsec. (c). 1981—Subsec. (a). Pub. L. 97–72, § 303(f)(1), substituted ‘‘direct housing loan’’ for ‘‘direct loan’’. Subsec. (b). Pub. L. 97–72, § 303(f)(2), substituted ‘‘or direct housing loan obtained’’ for ‘‘or direct loan ob- tained’’. 1976—Subsec. (a). Pub. L. 94–324, § 7(18), substituted ‘‘the veteran’’ for ‘‘him’’ in two places, ‘‘the Adminis- trator may deem’’ for ‘‘he may deem’’, ‘‘the transferee were a veteran’’ for ‘‘he were a veteran’’, ‘‘the trans- feree has assumed’’ for ‘‘he has assumed’’, and ‘‘is obli- gated’’ for ‘‘has obligated himself’’. Subsec. (b). Pub. L. 94–324, § 7(19), substituted ‘‘ob- tained by the veteran’’ for ‘‘obtained by him’’, ‘‘the Ad- ministrator determines’’ for ‘‘he determines’’, and ‘‘the Administrator deems’’ for ‘‘he deems’’. 1972—Pub. L. 92–328 designated existing provisions as subsec. (a) and added subsec. (b). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97–72 effective at end of 180- day period beginning on Nov. 3, 1981, see section 305 of Pub. L. 97–72, set out as an Effective Date note under section 3741 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–324 effective June 30, 1976, see section 9(a) of Pub. L. 94–324, set out as a note under section 3701 of this title. EFFECTIVE DATE OF 1972 AMENDMENT Pub. L. 92–328, title III, § 301(c), June 30, 1972, 86 Stat. 398, provided that: ‘‘Sections 201 through 206 of this Act [amending this section and sections 210, 1820 [now 3720], 3102 [now 5302], and 3503 [now 6103] of this title, and en- acting provisions set out as a note under section 5302 of this title] shall take effect upon the date of enactment of this Act [June 30, 1972].’’ § 3714. Assumptions; release from liability (a)(1) Except as provided in subsection (f) of this section, if a veteran or any other person dis- poses of residential property securing a loan guaranteed, insured, or made under this chapter and the veteran or other person notifies the holder of the loan in writing before the property is disposed of, the veteran or other person, as the case may be, shall be relieved of all further liability to the Secretary with respect to the loan (including liability for any loss resulting from any default of the purchaser or any subse- quent owner of the property) and the application for assumption shall be approved if the holder determines that— (A) the loan is current; and (B) the purchaser of the property from such veteran or other person— (i) is obligated by contract to purchase such property and to assume full liability for the repayment of the balance of the loan remaining unpaid and has assumed by con- tract all of the obligations of the veteran under the terms of the instruments creating and securing the loan; and (ii) qualifies from a credit standpoint, to the same extent as if the purchaser were a veteran eligible under section 3710 of this title, for a guaranteed or insured or direct loan in an amount equal to the unpaid bal- ance of the obligation for which the pur- chaser is to assume liability. (2) For the purposes of paragraph (1), para- graph (3), and paragraph (4)(C)(ii) of this sub- section, the Secretary shall be considered to be the holder of the loan if the actual holder is not an approved lender described in section 3702. (3) If the holder of the loan determines that the loan is not current or that the purchaser of the property does not meet the requirements of paragraph (1)(B) of this subsection, the holder shall— (A) notify the transferor and the Secretary of such determination; and (B) notify the transferor that the transferor may appeal the determination to the Sec- retary. (4)(A) Upon the appeal of the transferor after a determination described in paragraph (3) is made, the Secretary shall, in a timely manner, review and make a determination (or a redeter- mination in any case in which the Secretary made the determination described in such para- graph) with respect to whether the loan is cur- Page 913 TITLE 38—VETERANS’ BENEFITS § 3714 rent and whether the purchaser of the property meets the requirements of paragraph (1)(B) of this subsection. The Secretary shall transmit, in writing, a notice of the nature of such deter- mination to the transferor and the holder and shall inform them of the action that shall or may be taken under subparagraph (B) of this paragraph as a result of the determination of the Secretary. (B)(i) If the Secretary determines under sub- paragraph (A) of this paragraph that the loan is current and that the purchaser meets the re- quirements of paragraph (1)(B) of this sub- section, the holder shall approve the assumption of the loan, and the transferor shall be relieved of all liability to the Secretary with respect to such loan. (ii) If the Secretary determines under subpara- graph (A) of this paragraph that the purchaser does not meet the requirements of paragraph (1)(B) of this subsection, the Secretary may di- rect the holder to approve the assumption of the loan if— (I) the Secretary determines that the trans- feror of the property is unable to make pay- ments on the loan and has made reasonable ef- forts to find a buyer who meets the require- ments of paragraph (1)(B) of this subsection and that, as a result, the proposed transfer is in the best interests of the Department and the transferor; (II) the transferor has requested, within 15 days after receiving the notice referred to in subparagraph (A) of this paragraph, that the Secretary approve the assumption; and (III) the transferor will, upon assumption of the loan by the purchaser, be secondarily lia- ble on the loan. (C) If— (i) the loan is not approved for assumption under subparagraph (B) of this paragraph or paragraph (1) of this subsection; or (ii) no appeal is made by the transferor under subparagraph (A) of this paragraph within 30 days after the holder informs the transferor of its determination under para- graph (3) of this subsection, the holder may demand immediate, full pay- ment of the principal, and all interest earned thereon, of such loan if the transferor disposes of the property. (b) If a person disposes of residential property described in subsection (a)(1) of this section and the person fails to notify the holder of the loan before the property is disposed of, the holder, upon learning of such action by the person, may demand immediate and full payment of the prin- cipal, interest, and all other amounts owing under the terms of the loan. (c)(1) In any case in which the holder of a loan described in subsection (a)(1) of this section has knowledge of a person’s disposing of residential property securing the loan, the holder shall no- tify the Secretary of such action. (2) If the holder fails to notify the Secretary in such a case, the holder shall be liable to the Sec- retary for any damage sustained by the Sec- retary as a result of the holder’s failure, as de- termined at the time the Secretary is required to make payments in accordance with any in- surance or guaranty provided by the Secretary with respect to the loan concerned. (d) With respect to a loan guaranteed, insured, or made under this chapter, the Secretary shall provide, by regulation, that at least one instru- ment evidencing either the loan or the mortgage or deed of trust therefor, shall conspicuously contain, in such form as the Secretary shall specify, a notice in substantially the following form: ‘‘This loan is not assumable without the approval of the Department of Veterans Affairs or its authorized agent’’. (e) The Secretary shall establish in regula- tions a reasonable amount as the maximum amount that a lender may charge for processing an application for a creditworthiness determina- tion and assumption of a loan pursuant to this section. Such regulations shall establish re- quirements for the timely processing of applica- tions for acceptance of assumptions. (f)(1) This section shall apply— (A) in the case of loans other than loans to finance the purchase of real property described in section 3733(a)(1) of this title, only to loans for which commitments are made on or after March 1, 1988; and (B) in the case of loans to finance the pur- chase of such property, only to loans which are closed after January 1, 1989. (2) This section shall not apply to a loan which the Secretary has sold without recourse. (Added Pub. L. 100–198, § 10(a)(1), Dec. 21, 1987, 101 Stat. 1321, § 1817A; renumbered § 1814, Pub. L. 100–322, title IV, § 415(b)(2)(B), May 20, 1988, 102 Stat. 551; amended Pub. L. 100–689, title III, § 302, Nov. 18, 1988, 102 Stat. 4176; Pub. L. 101–237, title III, § 313(b)(1), Dec. 18, 1989, 103 Stat. 2077; renum- bered § 3714 and amended Pub. L. 102–83, §§ 4(a)(2)(B)(iv), (3), (4), 5(a), (c)(1), Aug. 6, 1991, 105 Stat. 403, 404, 406; Pub. L. 105–368, title X, § 1005(b)(10), Nov. 11, 1998, 112 Stat. 3365; Pub. L. 107–103, title IV, § 403, Dec. 27, 2001, 115 Stat. 993.) Editorial Notes AMENDMENTS 2001—Subsec. (d). Pub. L. 107–103 amended subsec. (d) generally. Prior to amendment, subsec. (d) read as fol- lows: ‘‘The Secretary shall provide that the mortgage or deed of trust and any other instrument evidencing the loan entered into by a person with respect to a loan guaranteed, insured, or made under this chapter shall contain provisions, in such form as the Secretary shall specify, implementing the requirements of this section, and shall bear in conspicuous position in capital letters on the first page of the document in type at least 2 and 1⁄2 times larger than the regular type on such page the following: ‘This loan is not assumable without the ap- proval of the Department of Veterans Affairs or its au- thorized agent.’.’’ 1998—Subsec. (f)(1)(B). Pub. L. 105–368 substituted ‘‘after January 1, 1989’’ for ‘‘more than 45 days after the date of the enactment of the Veterans’ Benefits and Programs Improvement Act of 1988’’. 1991—Pub. L. 102–83, § 5(a), renumbered section 1814 of this title as this section. Subsec. (a)(1)(B)(ii). Pub. L. 102–83, § 5(c)(1), sub- stituted ‘‘3710’’ for ‘‘1810’’. Subsec. (a)(2). Pub. L. 102–83, § 5(c)(1), substituted ‘‘3702’’ for ‘‘1802’’. Subsec. (a)(4)(B)(ii)(I). Pub. L. 102–83, § 4(a)(3), (4), sub- stituted ‘‘Department’’ for ‘‘Veterans’ Administra- tion’’. Page 914 TITLE 38—VETERANS’ BENEFITS [§§ 3715 to 3719 Subsec. (d). Pub. L. 102–83, § 4(a)(2)(B)(iv), substituted ‘‘Department of Veterans Affairs’’ for ‘‘Veterans’ Ad- ministration’’. Subsec. (f)(1)(A). Pub. L. 102–83, § 5(c)(1), substituted ‘‘3733(a)(1)’’ for ‘‘1833(a)(1)’’. 1989—Subsecs. (a), (c) to (f). Pub. L. 101–237, § 313(b)(1), substituted ‘‘Secretary’’ for ‘‘Administrator’’ wherever appearing. 1988—Pub. L. 100–322, § 415(b)(2)(B), renumbered sec- tion 1817A of this title as this section. Subsec. (a)(1). Pub. L. 100–689, § 302(1), substituted ‘‘Except as provided in subsection (f) of this section, if’’ for ‘‘If’’ and ‘‘loan guaranteed, insured, or made’’ for ‘‘guaranteed, insured, or direct housing loan obtained by a veteran’’. Subsec. (f). Pub. L. 100–689, § 302(2), amended subsec. (f) generally. Prior to amendment, subsec. (f) read as follows: ‘‘This section shall apply only to loans for which commitments are made on or after March 1, 1988.’’ [§§ 3715 to 3719. Vacant] Editorial Notes CODIFICATION Prior to renumbering of sections 1801 to 1851 of this chapter as sections 3701 to 3751 by Pub. L. 102–83, § 5(a), Aug. 6, 1991, 105 Stat. 406, sections 1815 to 1817A and 1819 of this chapter were renumbered and section 1818 of this chapter was repealed. Section 1815 was renumbered section 1803(a)(2) of this title. Section 1816 was renumbered sections 1832 and 1833 of this title. Section 1817 was renumbered section 1813 of this title. Section 1817A was renumbered section 1814 of this title. Section 1818, added Pub. L. 89–358, § 5(a), Mar. 3, 1966, 80 Stat. 25; amended Pub. L. 91–506, § 2(e), Oct. 23, 1970, 84 Stat. 1108; Pub. L. 93–569, § 8(6), (7), Dec. 31, 1974, 88 Stat. 1866, 1867; Pub. L. 94–324, § 4, June 30, 1976, 90 Stat. 720; Pub. L. 95–476, title I, § 106(a), Oct. 18, 1978, 92 Stat. 1499; Pub. L. 97–72, title III, § 303(g), Nov. 3, 1981, 95 Stat. 1060; Pub. L. 97–295, § 4(66), Oct. 12, 1982, 96 Stat. 1310, which related to service after Jan. 31, 1955, and prior to Aug. 5, 1964, or after May 7, 1975, was repealed by Pub. L. 100–322, title IV, § 415(b)(3), May 20, 1988, 102 Stat. 551. Section 1819 was renumbered section 1812 of this title. SUBCHAPTER III—ADMINISTRATIVE PROVISIONS § 3720. Powers of Secretary (a) Notwithstanding the provisions of any other law, with respect to matters arising by reason of this chapter, the Secretary may— (1) sue and be sued in the Secretary’s official capacity in any court of competent jurisdic- tion, State or Federal, but nothing in this clause shall be construed as authorizing gar- nishment or attachment against the Sec- retary, the Department of Veterans Affairs, or any of its employees; (2) subject to specific limitations in this chapter, consent to the modification, with re- spect to rate of interest, time of payment of principal or interest or any portion thereof, security or other provisions of any note, con- tract, mortgage or other instrument securing a loan which has been guaranteed, insured, made or acquired under this chapter; (3) pay, or compromise, any claim on, or arising because of, any such guaranty or insur- ance; (4) pay, compromise, waive or release any right, title, claim, lien or demand, however ac- quired, including any equity or any right of re- demption; (5) purchase at any sale, public or private, upon such terms and for such prices as the Secretary determines to be reasonable, and take title to, property, real, personal or mixed; and similarly sell, at public or private sale, exchange, assign, convey, or otherwise dispose of any such property; and (6) complete, administer, operate, obtain and pay for insurance on, and maintain, renovate, repair, modernize, lease, or otherwise deal with any property acquired or held pursuant to this chapter. The acquisition of any such property shall not deprive any State or polit- ical subdivision thereof of its civil or criminal jurisdiction of, on, or over such property (in- cluding power to tax) or impair the rights under the State or local law of any persons on such property. Without regard to section 3302(b) of title 31 or any other provision of law not expressly in limitation of this paragraph, the Secretary may permit brokers utilized by the Secretary in connection with such prop- erties to deduct from rental collections amounts covering authorized fees, costs, and expenses incurred in connection with the man- agement, repair, sale, or lease of any such properties and remit the net balances to the Secretary. (b) The powers granted by this section may be exercised by the Secretary without regard to any other provision of law not enacted expressly in limitation of this section, which otherwise would govern the expenditure of public funds, except that division C (except sections 3302, 3501(b), 3509, 3906, 4710, and 4711) of subtitle I of title 41 shall apply to any contract for services or supplies on account of any property acquired pursuant to this section. (c) The financial transactions of the Secretary incident to, or arising out of, the guaranty or in- surance of loans pursuant to this chapter, and the acquisition, management, and disposition of property, real, personal, or mixed, incident to such activities and pursuant to this section, shall be final and conclusive upon all officers of the Government. (d) The right to redeem provided for by section 2410(c) of title 28 shall not arise in any case in which the subordinate lien or interest of the United States derives from a guaranteed or in- sured loan. [(e) Repealed. Pub. L. 105–368, title VI, § 602(c)(1), Nov. 11, 1998, 112 Stat. 3346.] (f) Whenever loss, destruction, or damage to any residential property securing loans guaran- teed, insured, made, or acquired by the Sec- retary under this chapter occurs as the result of a major disaster as determined by the President under the Disaster Relief and Emergency Assist- ance Act (42 U.S.C. 5121 et seq.), the Secretary shall (1) provide counseling and such other serv- ice to the owner of such property as may be fea- sible and shall inform such owner concerning the disaster assistance available from other Fed- eral agencies and from State or local agencies, and (2) pursuant to subsection (a)(2) of this sec- tion, extend on an individual case basis such forebearance or indulgence to such owner as the Secretary determines to be warranted by the